Margin Calculator
Calculate profit margins, set prices from target margins, and analyze comprehensive margin breakdowns for your business
Calculate Profit Margin
Enter cost and selling price to calculate your profit margin
Profit Margin Formula
Profit Margin
Profit margin shows what percentage of each dollar of revenue is profit.
Markup
Markup shows how much you add on top of your cost to get the selling price.
What is Profit Margin?
Profit margin is a financial metric that measures what percentage of revenue remains as profit after accounting for costs. It's one of the most important indicators of business health and efficiency, showing how effectively a company converts sales into profits.
There are several types of margins: gross margin (revenue minus cost of goods sold), operating margin (after operating expenses), and net margin (after all expenses including taxes and interest). Each provides different insights into business performance.
Margin vs Markup: Key Differences
Profit Margin
Calculated as a percentage of the selling price (revenue).
Margin = (Revenue - Cost) ÷ Revenue × 100
Example: $20 profit on $100 sale = 20% margin
Markup
Calculated as a percentage of the cost.
Markup = (Revenue - Cost) ÷ Cost × 100
Example: $20 profit on $80 cost = 25% markup
Types of Profit Margins
Gross Profit Margin
Measures profitability after direct costs (COGS). Formula: (Revenue - COGS) ÷ Revenue. Good benchmarks vary by industry: retail (25-50%), manufacturing (25-35%), software (70-90%).
Operating Profit Margin
Accounts for operating expenses like rent, salaries, and utilities. Formula: (Revenue - COGS - Operating Expenses) ÷ Revenue. Shows operational efficiency.
Net Profit Margin
The bottom line after all expenses, taxes, and interest. Formula: Net Income ÷ Revenue. This is the true measure of overall profitability.
Industry Benchmark Margins
| Industry | Gross Margin | Operating Margin | Net Margin |
|---|---|---|---|
| Software/SaaS | 70-90% | 15-25% | 10-20% |
| Retail | 25-50% | 3-8% | 2-5% |
| Manufacturing | 25-35% | 8-15% | 5-10% |
| Financial Services | 60-80% | 25-40% | 15-25% |
| Healthcare | 40-60% | 10-20% | 5-15% |
| Restaurants | 60-70% | 5-10% | 3-9% |
How to Use This Calculator
Calculate Margin Tab
Enter your cost and revenue (selling price) to calculate your profit margin percentage, profit amount, and equivalent markup. Use this to analyze your current pricing.
Set Price from Margin Tab
Enter your cost and desired margin percentage to find the selling price you need. Perfect for pricing new products when you have a target margin in mind.
Margin Breakdown Tab
Get a comprehensive view of your business margins. Enter revenue, COGS, operating expenses, and other costs to see gross, operating, and net margins side by side.
Strategies to Improve Profit Margins
Increase Revenue
- Raise prices strategically
- Upsell and cross-sell products
- Add premium product tiers
- Improve sales conversion rates
Reduce Costs
- Negotiate with suppliers
- Optimize inventory management
- Automate repetitive tasks
- Reduce waste and inefficiencies
Common Margin Formulas
Profit Margin
Margin % = (Profit ÷ Revenue) × 100
Required Revenue
Revenue = Cost ÷ (1 - Margin%/100)
Margin to Markup
Markup % = Margin% ÷ (100 - Margin%)
Markup to Margin
Margin % = Markup% ÷ (100 + Markup%)
Frequently Asked Questions
What is a good profit margin?
A "good" margin varies by industry. Generally, a net margin of 10% is considered average, 20% is good, and 5% is low. However, grocery stores operate successfully at 2-3% while software companies may achieve 20-30%.
Why is margin better than markup for analysis?
Margin is based on revenue, which makes it easier to compare across products and calculate break-even points. It also directly shows how much of each dollar of sales becomes profit.
Can profit margin be over 100%?
No, profit margin cannot exceed 100% because profit can never be greater than revenue. However, markup can exceed 100% (e.g., selling a $50 cost item for $150 is a 200% markup but only a 66.7% margin).
How do I convert between margin and markup?
Use these formulas: Markup = Margin ÷ (1 - Margin) and Margin = Markup ÷ (1 + Markup). For example, a 25% margin equals a 33.3% markup.